The Kerala Authority of Advance Ruling (AAR) ruled that no GST payable on Composite supply of healthcare services.

The applicant, M/s. ST. Thomas Hospital has a multi-speciality hospital providing health care services with professionals like doctors, nursing staff, lab technicians, etc. Medicines, surgical items, implants, stents and other consumables etc. are supplied through pharmacy to in-patients under the prescription of the doctors which are incidental to the health care services rendered in the hospital. The medicines and surgical items are taken from the inpatient pharmacy by the nursing staff to the bedside of the inpatients and managed by the nursing staff themselves.

The inpatients are provided with stay facilities, medicines, consumables, implants, dietary food and other surgeries / procedures required for the treatment. The Central store of the hospital procures stocks of medicines, implants, consumables etc from various suppliers and distributes to its outlets such as inpatient pharmacy, operation theatre pharmacy and outpatient pharmacy based on the indent issued. The inpatient pharmacy and operation theatre pharmacy supplies medicines, implants and consumables only to inpatients, whereas the outpatient pharmacy attached to the hospital entertains the medical prescription of outpatients.

Applicant raise an invoice on the inpatients at the time of discharge in which the charges for various items like, room rent, lab and diagnostic services, surgery, doctor’s consultation, nursing charge, diet charges, medicines, implants and other surgical items are included. Along with the rendering of healthcare services to inpatients, they also supply food to them. There are two categories of inpatients-while the food to be consumed by some of the inpatients are under the direction / supervision of the dietician, some other inpatients are not under any specific direction or supervision by the dieticians but only under general direction of doctors.

The applicant has sought the advance ruling on the issues whether the medicines, surgical items, implants, stents and other consumables used in the course of providing health care services to inpatients admitted to the hospital for diagnosis, or medical treatment or procedures would be considered as “Composite Supply” of health care services under GST and consequently can exemption under Notification No.12/2017 Central Tax (Rate) dated 28.06.2017 read with Section 8(a) of GST be claimed, Whether the supply of food to all the inpatients would be considered as “Composite Supply” of health care services under GST and consequently can exemption under Notification No.12/2017 Central Tax (Rate) dated 28.06.2017 read with Section 8(a) of GST be claimed.

The Coram of Joint Commissioner of Central Tax, Shiva Prasad and Additional Commissioner of State Tax, Senil A.K.Rajan ruled that the supply of medicines, surgical items, implants, stents, and other consumables to inpatients admitted to the hospital for diagnosis, or medical treatment or procedures is a composite supply where the principal supply is healthcare services falling under SAC 999311 which is exempted as per entry at Sl No. 74 of Notification No.12/2017 Central Tax (Rate) dated 28.06.2017.

“The supply of food to inpatients admitted to the hospital for diagnosis, or medical treatment or procedures is a component of the composite supply where the principal supply is healthcare services falling under SAC 999311 which is exempted as per entry at Sl No. 74 of Notification No.12/2017 Central Tax (Rate) dated 28.06.2017,” the AAR ruled.

The AAR ruled that the eligibility of credit of tax paid on the inputs and input services used for taxable as well as exempted supplies are governed by the provisions of Section 17 (2) of the CGST Act, 2017 and Rule 42 of the CGST Rules, 2017. The eligible input tax credit shall be calculated as per the formula prescribed in Rule 42 of the CGST Rules, 2017.